SYMPOSIA ON LINKAGES: how do WE BRIDGE THE GAP?

Dialogue for a balanced approach in New Trade Arena organised by CUTS in association with London School of Economics and Political Science.

CUTS in association with London School of Economics had organised a one-day symposium on linkages at London on 10 October2001. The purpose of the symposium was to conduct a dialogue between protagonists and antagonists on the contentious issues of environment and labour standards in trade agreements on the eve of the 4th WTO Ministerial Meeting in Doha, Qatar in November. 

Press release

Keynote Address

Brief Report

Draft Agenda

Development Concerns Must be Kept Upfront, said UK’s Minister

London, 10th October 2001: "To discuss the relationship between trade policy, the environment and labour standards, one has to start by looking at the link between trade and the reduction of poverty because this goes to the heart of the debate about globalisation," said Hilary Benn, Under Secretary of State, Department for International Development, UK. 

He was delivering the keynote address at the inaugural session of a one-day Symposium titled ‘Linkages: How do we bridge the gap?’ jointly organised by Jaipur, India-based CUTS Centre for International Trade, Economics & Environment and London School of Economics and Political Science in London on 10th October 2001. More than 50 participants from governments, non-governmental organisations, academia and media participated in the discussion. 

Benn pointed out that globalisation is helping in eradicating poverty all over the world but its negative aspects need to be looked into as well. Focussing on linkages between trade and labour standards and trade and environment, he said that while it is important to improve these standards, protectionism should not be allowed at any stage. "Trade sanctions approach should not be used to enforce labour and environmental standards in developing countries, and in any future trade negotiations at the World Trade Organisation (WTO) development concerns of developing countries should be discussed and addressed,"

"There are substantial inequities in the existing international trading system. Developed countries have long preached the virtues of openness, but practice lags behind the rhetoric. Despite progress over the last 50 years, developed countries maintain significant tariff and non-tariff barriers against the exports of developing countries. We all agree that there need be changes in the international trading system to better promote the interests of developing countries," he commented. 

Welcoming the participants, Pradeep S. Mehta, Secretary General of Consumer Unity & Trust Society (CUTS) said that in the past many rich countries have made use of non-trade issues to deny market access to developing countries. They rightly see these issues as new forms of protectionism. Razeen Sally, Senior Lecturer of International Political Economy of the London School of Economics and Political Science pointed out that the WTO should not be allowed to become an institution governing domestic policy formulation on issues relating to labour standards and environmental standards.  

Responding to Benn’s speech, Sanjay Baru, Editor of The Financial Express, New Delhi pointed out that these two linkages – trade and labour and trade and environment – were only the beginning of using trade policies to influence domestic policies. "Trade policies cannot and should not be used to deal with the negative impacts of globalisation on certain groups of people," he argued. 

Discussions were held on issues of trade and labour standards, voluntary instruments and fair trade, multilateral environmental agreements and the WTO, and investment and the environment. Noted speakers were Simon James of the Trade Union Congress of UK, Amit Dasgupta of the SAARC Secretariat, Kathmandu, Stephen Pursey of the International Labour Organisation, Fiona Gooch of Traidcraft Exchange of UK, Ritu Kumar of Commonwealth Secretariat, London, Charles Arden-Clarke of the United Nations Environment Programme, Veena Jha of the United Nations Conference on Trade and Development, Oduor Ong’wen of EcoNews Africa, Nairobi. 

Speaking at the closing session, Robert Madelin, Director General of Trade, European Commission, discussed EC’s agenda on trade and environment. He said that the European Union wants to promote environmental standards without allowing any scope for protectionism. "Developing and developed countries should come together and sort out the problems in this regard as soon as possible," he suggested. 

The symposium was organised as a part of the CUTS-CITEE’s work programme on linkages between trade and non-trade concerns. A series of such events will be organised all over the world to address the issues of linkages between trade and non-trade concerns in an unbiased manner and try to find solutions to the problems by evolving a roadmap through consensus rather than creating roadblocks. The next event, in association with the Brookings Institution, will be held on 19th October 2001 in Washington DC, USA. 

For more information, please contact

Mr. Sandeep Singh

E-mail: cuts@cuts.org  &   linkages_cuts@rediffmail.com

Trade and Poverty Reduction

SPEECH BY HILARY BENN, Under Secretary of State, Department for International Development, UK TO THE CUTS SYMPOSIUM (10^th October 2001) On ‘Linkages: How do we bridge the gap?’

The focus of this conference today is the relationship between trade policy, the environment and labour standards, but I want to start by looking at the link between trade and the reduction of poverty because I think this goes to the heart of the debate about globalisation.

Globalisation - as a process – has been with us a very long time in the sense that growing interdependence has always been a characteristic of human activity, although it has, of course, gathered pace and reach greatly in the last 50 years.

It is not easy in current debates to disentangle the various elements that make up ‘globalisation’: concern about loss of ability to influence events; the pace of change; its impact on the poor across the world; and a fear of loss of identity and culture.  And from some quarters one could get the impression that globalisation – in the sense of economic growth, more trade, and investment – is the source of all that is wrong in the world and, in the case of developing countries, is responsible for a worsening impoverishment of their people.

• And yet the truth is a bit more complex.  It is of course the case that since the 1960s - the very period in which globalisation has reached its peak:
  
• average life expectancy in developing countries has risen from 46 to 64 years of age 
• infant mortality rates have halved
• polio has come close to eradication
• the proportion of children in primary schools has increased by 80%; and
• access to safe drinking water and basic sanitation has doubled.

As the latest UN Human Development Report put it:

“ the impressive gains of the past 30 years demonstrate the possibility of eradicating poverty”.

And yet at the same time, and to our shame, at the start of the new Millennium, one in five of the world’s population - 1.2 billion people – still live in abject poverty, without adequate food, clean water, sanitation, healthcare or basic education for their children.

Much of this process has been driven by the interaction between human beings and technology; what technology makes possible, we as human beings have a propensity to make happen.  We also need to face up to the truth that while - in overall terms –  increased trade and economic growth has brought benefits, it also creates losers as well as winners.

We know this from our own history - the enclosures of the 18^th century and the growth of the factories and mills. Our industrial revolution involved a painful economic and social transformation, but should we have – could we have – called a halt to that process, or were we – are we - dealing with profound and irreversible historical shifts?

As you will know, since 1997 all of the UK’s development effort has been focused around the achievement of the International Development Targets – targets that came out of the great UN conferences of the 1990s.  The targets include by 2015: halving the proportion of the world’s population living in extreme poverty; providing universal primary education; and improving access to basic healthcare and reproductive healthcare.

Trade has an important role to play in helping to achieve these targets, but what is the relationship between trade and poverty? Does increased trade always mean increased inequality, greater exploitation of workers and degradation of the environment? Or can increased trade be a route to the economic growth that is needed to improve the living standards of the very poorest?

Economic growth is, of course, a product of many causes and no one influence can take the credit or the blame for a country’s overall economic performance.  But as Dani Rodrik of Harvard University argues, “No country has developed successfully by turning its back on international trade and long-term capital flows.  Very few countries have grown over long periods of time without experiencing an increase in the share of foreign trade in their national product”.

We can debate the precise process by which trade leads to growth, but the real challenge is to manage this process – to maximise economic opportunities and to equip people, particularly through education, to take advantage of these opportunities.

Trade liberalisation is often accused of increasing inequality.  The research evidence commissioned for our globalisation White Paper suggests that there is no systematic relationship between increased openness and inequality – in some cases the poor gain more from trade than the average citizen; in other cases they gain less.

Nor is there any systematic relationship between economic growth and inequality.  Over recent decades, inequality has risen in some cases and fallen in others, in both fast-growing and slower growing economies.

But what is clear is that by expanding access to ideas, technology, goods, services and capital, trade openness can certainly create the conditions for faster economic growth.  And the progress which has been made over the last few decades in reducing the proportion of people living in poverty has been largely the result of economic growth - by raising incomes generally, including those of poor people.  Economic growth is thus an indispensable  element in poverty reduction.

Look at China; the country where more people have been lifted out of poverty in the last generation than any other. In 1975, average income per head of population in the USA was 19 times larger than in China. Now it is just 6 times higher.

By contrast, Africa remains the biggest single development challenge in the world. Its share of world trade has fallen. 40% of savings leave the continent. It has been torn apart by conflict and civil war. And its economic progress has been uneven, with parts of the continent having slipped below where they were 5,10 or even 25 years ago. It is not the case that Africa has been over-exploited by trade and foreign investment; in truth, it has had too little of either.

But by itself growth is not enough.  Pro-poor development requires growth and equity.  Poverty reduction is faster where growth is combined with declining inequality.  And poverty reduction is also more easily achieved in less unequal countries – the lower the level of inequality, the larger the share of the benefits of growth that accrue to the poor.  

How then can we use trade to make faster progress in the reduction of poverty ?  I believe that we need to look at existing international trade rules, at the capacity of poorer countries to take advantage of new trade opportunities, and at the role of developing countries within the World Trade Organisation.  And all of this needs to be seen within the context of the forthcoming international trade meeting at Doha, which we hope will lead to the launch of a new multilateral Trade Round.

Now, as we know, much of the globalisation protest has revolved around the WTO. And here it is worth making a point about the central issue of democratic control and influence. Is it really the case that those we look to to regulate – elected governments – have given up the ghost in the face of the corporate challenge ?  Of course, the nature of the relationship between government and business has changed as the nature of the economy has changed and as what one government can do alone within its own borders has also changed. 

And yet because business has moved to the global level does not mean that the power of politics to regulate has disappeared. What it does mean, however, is that this power has to learn to operate at a regional and global level as well.  We have to refashion our instruments of political accountability to work globally and that is exactly why we need a WTO.

Now support for open trade is not to be confused with unregulated trade.  On the contrary, if open trade is to work for the world’s poor we need effective multilateral trade rules made by an institution capable of enforcing them, for poor countries and rich countries alike.   

Of course, it is true that the WTO still bears the heavy imprint of the much smaller group of mainly northern countries that have dominated negotiations since the founding of the General Agreement on Tariffs and Trade (GATT).  And it is certainly true that the WTO should be more transparent and open and its rules easier to understand.   But it is essential that we retain, strengthen and reform the WTO and the rules-based system, and ensure that it works for poor countries.  The alternative is a world in which the rich and powerful dominate the rest, or where the richer economies make bilateral trade deals between themselves at the expense of the poorest.

So what are the priorities?

First, the UK Government wants the WTO to commit itself, with the rest of the international community, to achieving the International Development Targets.  This would send a powerful signal of its commitment to poverty reduction and be an acknowledgement that trade is a means to an end, not an end in itself.

Secondly, we want tariff reductions to benefit developing countries. There are substantial inequities in the existing international trading system.  Developed countries have long preached the virtues of openness: but practice lags behind the rhetoric.  Despite progress over the last 50 years, developed countries maintain significant tariff and non-tariff barriers against the exports of developing countries.

These barriers are most damaging to developing countries in areas such as agriculture, textiles and clothing. It is estimated that total developing country gains from a 50 per cent cut in tariffs, by both developed and developing countries, would be in the order of $150 billion – around three times annual global aid flows.

A key area for a new Round should therefore be significant improvements in agricultural market access by all members, along with a large reduction in agricultural export support.  The UK is also calling for greater generosity in the trading opportunities that rich WTO members offer to the very poorest countries.  This would build on the EU’s Everything But Arms agreement, which gives tariff free access for all Least Developed Country (LDC) exports – except arms. We want all developed countries to provide duty and quota free access for all LDC products.

Thirdly, a Development Round should also consider the case for broadening the coverage of issues in the WTO.  The UK believes that subjects such as investment, competition policy, trade facilitation and transparent government procurement could encourage better governance and more investment in developing countries – both critical for poverty reduction – although I recognise that concerns have been raised about the capacity of developing countries to deal with such a broad agenda.

Fourthly, as well as making progress with rules and agreements, a development round should also spur the reform and evolution of the WTO to strengthen the multilateral system and to help give developing countries a more effective voice within the WTO.  And at the same time, we need to work with developing countries, so that they have the capacity to take advantage of new trade opportunities.

I think that progress on a development round is not only essential: it is also achievable.  Two-thirds of the WTO’s 142 members are developing countries.  Negotiations cannot start without their approval.  What’s more, the negotiations cannot be concluded unless developing countries are satisfied with the outcome.  The negotiations will not be easy, but if developing countries use their influence in a new round then they can make real gains. But if there is no new round then there can be no reform of the WTO. The choice is there to be made.

I now want to turn to trade policy and improvements in working conditions and the environment.

Take labour standards. One of the most widespread public concerns about globalisation is its impact - real or perceived – on labour standards.  Across the world, millions of people – children and adults – work in conditions which are hazardous and abusive.  They may be subject to sexual harassment, exploitative hours or wages, physical dangers and, in the worst cases, imprisonment and violence. 

If globalisation is to work for poor people, governments, international institutions and civil society need to promote this awareness and support policies and regulatory systems that provide legal, physical and social protection for working people.

In 1998 the international community adopted the International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work.  This Declaration covers the rights to freedom of association and to collective bargaining and the elimination of all forms of forced or compulsory labour, and of employment discrimination.  The UK Government strongly supports this Declaration and we are working with the ILO and others to make progress towards the full realisation of these rights.   And we have committed £23 million to the ILO to support programmes to combat child labour and forced labour. 

We also welcome the fact that at the ILO meeting last March, governments, trade unions and employers discussed and agreed ways of strengthening the ILO Working Party on the Social Dimensions of Globalisation. This will include a permanent forum for exchange of views. All this I suspect is common ground between us.

Where we enter more difficult territory is with the proposal made in some quarters that we should impose sanctions on countries that fail to comply with core labour standards.  Here the question is – would this help or harm the people on whose behalf we claim to act?

Consider the case of child labour, which exists in every poor country in the world.  There are 250 million child labourers worldwide – 95 per cent of whom work in the domestic rather than the export sector.  These children are trapped in this situation by the need to provide additional income for their desperately poor families.   Taking sanctions against these countries would simply drive these communities and countries into even further poverty. Is that what we want?

We should also remember that there are those who seek to use labour standards for straightforward protectionist purposes - the excuse of enforcing higher labour standards, or preventing “a race to the bottom”.

But even here the globalisation debate often confuses more than it enlightens.  When it comes to rates of pay, the facts show that wages paid by multi-national companies operating in low-income countries are on average higher than those of domestic company manufacturing wages. There can of course be serious problems with conditions of work and exploitation. But surely the response is to do what government and trade union movement did in the 19^th century – to regulate and to organise to improve working conditions – as opposed to either saying to the companies; ‘take your factory or mill and get out of town’ or seeking to penalise economies that are in a process of transition.

What we need instead in a sophisticated strategy – that works with governments and communities, helping children to move out of work and into school, by providing better employment opportunities for their parents.  We  need to help governments to strengthen legal and regulatory systems so that core labour standards such as freedom of association can be safeguarded.  And we need to help countries to grow their economies and create the resources for poverty reduction and better public services.

When we turn to the environment the linkages are even more complex. The key to environmental management is understanding where the stresses and strains caused by faster economic growth will arise. It requires effective transparent government.  Without this, the interests of the poor and considerations of sustainability are likely to be compromised.

It is important that the access of the poor to essential resources is protected, so that community and local business management of environmental resources is strengthened and that there is increased focus on the problems and hazards that affect the poor.

Three weeks ago I was Indonesia for the first ever east Asian conference on illegal logging. It is of course a major environmental issue in the region and the fact that the conference took place at all was a significant step forward. Tackling the problem requires action by both producing and consuming countries, and one way of making progress – in the absence of international agreements – would be the use of voluntary bilateral agreements between producer and consumer countries.

But I was also particularly struck by the meeting we had with a group of villagers who had taken over a former logging concession and had expressed the wish to manage it sustainably. They were presenting a challenge to the Forestry Department which was both about policy – how could a state asset be managed in this way ? – and communication – how were the two parties to work together to make this happen in practice ? It also struck me that this is a problem not unknown in the UK too!  

There is also need for action at an international level. Governments have already concluded more than 200 multilateral environmental agreements (MEAs) to deal with global environmental problems. MEAs are designed to solve transboundary environmental problems and to prevent unilateral action, which can lead to discrimination and protectionism.  About 20 MEAs include provisions that can affect trade and there is reasonable concern that some of these may run counter to the principles of the WTO.  EU countries are committed to seeking clarification of the relationship between MEAs and the WTO to prevent any disputes arising in the future and to ensure that trade and environment rules are mutually supportive.

I also believe that it is also very important that the environmental movements of the North give much greater attention to the needs of poor people in the South.  The debate on environment issues in the WTO must focus on the needs of the poor and on how we can encourage sustainable livelihoods for all. We need to make progress on environmental issues, but we also need to offer developing countries new opportunities to grow and develop.  

I want to conclude by coming back to where I began – the link between trade and poverty. We all agree that there need to be changes in the international trading system to better promote the interests of developing countries.  We all agree in the importance of core labour standards and environmental protection. But most important of all is the case for recognising that our mutual interdependence – and the strength, opportunity and fragility that come with it – was made stronger by the events of 11^th September. And the case for using its potential to help build a more equal and more just world is stronger still, Because only by doing say can we hope to move into a safer world than the one we seem to have become in the past 3 weeks.    

  DRAFT AGENDA

For More information please contact Mr. Sandeep Singh. 

CUTS Centre for International Trade, Economics & Environment (CUTS-CITEE),
D-217, Bhaskar Marg, Bani Park, Jaipur 302 016, India.
Ph: 91.141.2282482-84, Fax: 91.141.20 7486/ 20 2968/20 3998
Email: cutsjpr@sancharnet.in/ citee@sancharnet.in
 

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